USAA further extends maturity on two tranches of Residential Re cat bonds

U.S. primary military mutual insurer USAA has further extended the maturity date for two of its at-risk of loss tranches of Residential Re (ResRe) catastrophe bond notes.A number of tranches of USAA’s catastrophe bonds under its Residential Reinsurance programs have been extended to allow for continued development of losses from both 2017 and 2018 catastrophe events.

These tranches provide the insurer with occurrence and aggregate reinsurance protection, so as a result they have been exposed to qualifying losses from the hurricanes, California wildfires and also other perils such as winter and severe storms.

First, the remaining $20 million of principal from the Residential Reinsurance 2013 Ltd. (Series 2013-2) catastrophe bond per-occurrence Class 1 notes, that were due to mature on March 6th 2019, have now had their maturity extended further to June 6th 2019.

This is the second most risky per-occurrence tranche of USAA’s cat bond backed reinsurance program. It had been allowed to partially mature, reducing the amount of principal at risk to just $20 million, but that still seems to be at-risk of loss.

This tranche is now priced for a roughly 15% to 20% loss of principal on secondary broker pricing sheets, which is actually an improvement from the 65% mark down that was seen a few months ago.

The other tranche that has been further extended is the $80 million aggregate cover Class 10 notes from the Residential Reinsurance 2014 Ltd. (Series 2014-1) cat bond, which had also had maturity scheduled for March 6th 2019, but have now had their maturity extended by a further three months June 6th 2019 as well.

This tranche remains marked down for a total loss in the secondary market, suggesting investors anticipate no recovery of principal from this cat bond tranche.